Puritt v. Allstate Insurance Co.

                                               First Division
                                               October 15, 1996  
                                        








1-95-2678

WILBURT PURITT, DR. KIRSTEN KNUDSEN,    )    APPEAL FROM THE
individually and on behalf of all       )    CIRCUIT COURT OF
others similarly situated,              )    COOK COUNTY.
                                        )
          Plaintiffs-Appellants,        )
                                        )
     v.                                 )
                                        )
ALLSTATE INSURANCE COMPANY,             )    HONORABLE
                                        )    ALBERT GREEN,
               Defendant-Appellee.      )    JUDGE PRESIDING.


     JUSTICE WOLFSON delivered the opinion of the court:
     This case concerns an insured's claim against his insurance
company for medical payments benefits.  It is more than a dispute
about amounts.  The insured, Wilburt Puritt (Puritt) contends
Allstate Insurance Company (Allstate) has a regular policy and
practice of underpaying the medical bills incurred by its
insureds.
   Puritt filed suit against Allstate.  In it, he sought
individual and class action relief.  Dr. Kirsten Knudsen,
assignee of the rights of five other Allstate insureds, also is a
named plaintiff in these breach of contract and declaratory
judgment claims against Allstate.  Allstate filed motions to
dismiss the complaint, contending the plaintiffs lacked standing
to bring their lawsuit and that this is not a proper class
action.  The trial judge granted Allstate's motions.  We reverse
and remand for further proceedings.
BACKGROUND
     The contract provision that underlies this action is the
Automobile Medical Payments section in the insurance policy 
Allstate issued to Puritt and the five assignors.  It provides:   
     "Allstate will pay to or on behalf of an insured person
     all reasonable expenses actually incurred for necessary
     medical treatment, medical services or medical products
     actually provided to the insured person. ***"
     Later, in the Medical Payments section, under the heading of
"Unreasonable or Unnecessary Medical Expenses," the policy
provides:
     "If the insured person incurs medical expenses which
     are unreasonable or unnecessary, we may refuse to pay
     for those medical expenses and contest them. 
     Unreasonable medical expenses are fees for medical
     services which are substantially higher than the usual
     and customary charges for those services.  Unnecesary
     medical expenses are fees for medical services which
     are not usually and customarily performed for treatment
     of the injury, including fees for an excessive number,
     amount or duration of medical services."
And then:
     "If the insured person is sued by a medical services
     provider because we refuse to pay contested medical
     expenses, we will pay all defense costs and any
     resulting judgment against the insured person.  ***"
     The policy is silent on what happens to health provider
claims that do not become lawsuits.
     After Puritt's complaint was dismissed with leave to amend,
he and Dr. Knudson filed the "First Amended Class Action
Complaint for Declaratory Relief and Damages" that is the subject
of this appeal.
     The amended complaint alleged that Puritt was a person
covered by an Allstate insurance policy, that he had been injured
in an automobile accident, that he had received medical treatment
and agreed to pay for the services rendered, that he had
submitted the medical claims to Allstate, and that the claims
were not paid in full based on Allstate's determination that the
charges were unreasonable.  He also alleged he paid his medical
provider the balance of the charges not paid by Allstate.
     Dr. Knudsen was identified in the complaint as a doctor of
chiropractic medicine who treated five patients covered by
Allstate policies.  She alleged each of these patients had been
involved in an automobile acident, had submitted claims to
Allstate under medical payments provisions of the policy for
treatment rendered by her, and had received only partial payment
of the bills.  Dr. Knudsen's allegation that assignments
from her patients placed her in their shoes for purposes of this
lawsuit went unchallenged.
     Both Puritt and Dr. Knudsen alleged, as individuals and on
behalf of a purported class believed to be in excess of 5,000
members, that Allstate's refusal to pay the full amount of the
bills was unreasonable and represented breaches of the insurance
contract.  The core allegation is that Allstate has a policy and
practice of rejecting all or part of legitimate medical claims by
using a payment schedule that is unreasonably low and arbitrarily
set, without regard to the "usual and customary" fees actually
charged by similar medical care providers within the applicable
geogaphic region.
     Allstate brought motions seeking dismissal under sections
2-606, 2-615, and 2-619 of the Civil Practice Act.  The trial
judge dismissed the individual and class actions with prejudice.
     When dismissing Puritt's individual action, the trial judge
went beyond the face of the pleadings to consider an affidavit
submitted by Allstate.  We assume that dismissal was under
section 2-619.  See Janes v. Albergo, 254 Ill. App. 3d 951, 626 N.E.2d 1127 (1993).  Dismissal of Dr. Knudsen and the class
appears to be based on section 2-615, since the trial judge found
the plaintiffs' pleadings failed to establish standing and
precluded a class action as a matter of law.  See Evers v. Edward
Hospital Association, 247 Ill. App. 3d 717, 617 N.E.2d 1211
(1993).
     Either way, we review the trial judge's orders de novo.  See
Sherman v. Kraft General Foods, Inc., 272 Ill. App. 3d 833, 651 N.E.2d 708 (1995); Crespo v. Weber Stephen Products Co., 275 Ill.
App. 3d 638, 656 N.E.2d 154 (1995).
DECISION
     1. Standing of the individual plaintiffs.
     Allstate contends, and the trial judge apparently agreed,
that Puritt lacked standing for two reasons.  First, because he
"manufactured" standing by paying his medical bills in full;
second, because he did not and could not suffer any injury.
     While we agree that a litigant cannot manufacture standing
via "subsequent events," (CSM Insurance Building, Ltd. v. Ansvar
America Insurance Co., 272 Ill. App. 3d 319, 323-24, 649 N.E.2d 600 (1995)), we find nothing like that happened here.
Puritt paid his bills seven days before his first complaint was
filed.  The fact that he did not allege payment in his original
complaint, but did in his first amended complaint, is of no
consequence.
     Allstate contends the only way Puritt could establish he 
was injured is by refusing to pay the bill, wait for a claim 
against him by the medical provider, then rely on Allstate to 
defend and indemnify him.  Puritt does not have to wait for a
lawsuit against him, says Allstate, despite the policy language
that keeps the insurance company on the sidelines until its
insured "is sued by a medical services provider***"
     As proof that the policy means more than it says, Allstate
filed an affidavit of its Claims Manager, John Valaitis:
     "Pursuant to the terms of the aforementioned policy, if
     Allstate disputes the validity of a medical care
     charge, and therefore does not pay the entire amount of
     that charge, Allstate will defend and indemnify these
     injured persons if they are sued by the medical care
     providers which have not been fully paid, and Allstate
     will take all due steps to ensure that no credit
     problems result to the insured persons from such a
     dispute." (Emphasis added.)
     Allstate contends the Valaitis affidavit means its insureds
get all the protection they ever will need.  We do not share
Allstate's sanguine view of the affidavit.  Valaitis speaks in
terms of what will happen if the insured is sued.  It is hard to
tell whether the promise to "take all due steps to ensure that no
credit problems result" applies to nonlawsuit situations,
but even if it does, it is not much of a promise.  
     Allstate apparently envisions standing aside while doctors
or their collection agencies press the patient for payment of
bills.  That approach threatens irreparable injury to the
doctor-patient relationship.  It also invites the filing of
lawsuits in an already congested court system.
     Allstate's policy, with its reference to "any resulting
judgment against the insured person," recognizes that an insured
may be held personally liable for unpaid medical expenses.  We
have held that "one incurs expenses when one becomes liable for
them."  American National Bank & Trust Co. v. Steiner, 235 Ill.
App. 3d 1101, 1107, 603 N.E.2d 8 (199l).
     If, as the plaintiffs contend, Allstate as a matter of
policy and practice makes arbitrary and unreasonable
determinations concerning the fees medical providers should
charge, enough of an injury is established to defeat the motions
to dismiss.
     Generally, to have standing a person must show that he has
sustained, or is in imminent danger of sustaining, an injury. 
The injury, however, does not have to be economic.  Waterfront
Estates Development, Inc. v. Palos Hills, 232 Ill. App. 3d 367,
371, 597 N.E.2d 641 (1992).  See Arlington Heights v. Metro
Housing Development Corp., 429 U.S. 252, 262-63, 50 L. Ed. 2d 450, 462-63, 
97 S. Ct. 555, 562 (1977)(real estate developer's assertion of
right to be free of arbitrary zoning actions is sufficient
injury).
     Puritt and Dr. Knudsen, through the five assignments,
possess a contractual right to reimbursement for their legitimate
and reasonable medical expenses.  They allege Allstate's
systematic, arbitrary determination of "unreasonable or
unnecessary" medical expenses places them in imminent danger of
suffering economic loss.  The allegations, taken as true for
purposes of the motions to dismiss, establish an actual
controversy and a claim or right capable of being affected.  That
is enough at this stage of the proceedings.  See Monroe v. U.S.
Fidelity and Guaranty Co., 237 Ill. App. 3d 261, 603 N.E.2d 855
(1992). 
     The insureds did not have to wait until lawsuits against
them were filed or collection agents began harassing them or
their credit files were red-flagged.  There is standing.  We
therefore reverse the trial court's order dismissing the
individual claims for lack of standing and remand for further
proceedings.
     2. The class action.
     Relying on two Illinois decisions, the trial judge agreed 
with Allstate that a class action could not be maintained.  The
cases are Kostur v. Indiana Insurance Co., 192 Ill. App. 3d 859,
549 N.E.2d 685 (1989), and Blake v. State Farm Mutual Automobile
Insurance Co., 168 Ill. App. 3d 918, 523 N.E.2d 85 (1988).
     The facts in Kostur and Blake are similar.  In Kostur, the
plaintiffs alleged that the defendant insurance company's failure
to automatically include or offer underinsured motorist coverage
violated Illinois law.  In Blake, the plaintiffs alleged State
Farm failed to offer increased uninsured and underinsured
motorist coverage when it offered other automobile insurance, and
that the company's "acknowledgment/rejection form" was
inadequate.
     In both cases the courts held the plaintiffs had no standing
to bring a class action.  The requirement of a common question of
law or fact was not met.  There was no commonality among class
members. 
     Blake's allegations stemmed from his individual negotiations
with State Farm's agent.  In addition, Blake suffered no injury
until he was involved in an accident with an uninsured motorist.
The accident, then, was an intervening factor.  Without it,
injury for class members would be speculative.
     In Kostur, one reason for affirming the dismissal was that
injury to class members was speculative without the intervening
factor of an automobile accident.
     We do not read Kostur and Blake as meaning no class action
can be maintained where the insurer's liability arises from an
automobile accident.
     The distinction between those cases and this case lies in 
the definition of the purported class.  In Blake the proposed 
class included all "new business" policyholders.  In Kostur the
proposed class consisted of persons issued new or renewed
policies in which the amount of underinsured motorist coverage
was less than the amount required by law.  No harm would befall 
those plaintiffs unless they were injured in an auto accident.
That may never have happened to some of them.  The accident was
an intervening factor, the possible harm speculative.
     The class is defined differently in this case.  It consists
of Allstate's insureds (or health care providers taking an
assignment of benefits from an insured) who had been involved in
an auto accident, were injured, received medical treatment for
which they submitted claims under the medical payments provisions
of their policies, and were tendered less than the amounts billed
based on Allstate's alleged "policy and practice" of depriving
its insureds of reasonable payments on their medical claims.
     The auto accident is not an intervening factor in this case.
It is an essential part of the class description.  No one can be
a member of the purported class unless he or she has been injured
in an auto accident.  Kostur and Blake do not apply.
     It could be said at this stage of the proceedings that some
of the purported claims would require separate adjudication. 
But, where a predominant and common question of law or fact
exists, requirement of individual proofs, or multiple claims
requiring separate adjudication, do not bar class actions.
Barliant v. Follett Corp., 74 Ill. 2d 226, 234-35, 384 N.E.2d 316
(1978).  The basic criterion for maintaining a class action "is a
community of interest in the subject matter of the suit and in
the remedy."  Newberry Library v. Board of Education, 387 Ill. 85, 95, 55 N.E.2d 147 (1944).  See also Arca v. Colonial Bank &
Trust Co., 265 Ill. App. 3d 498, 637 N.E.2d 687 (1994).
     This case is more like Van Vactor v. Blue Cross Association,
50 Ill. App. 3d 709, 365 N.E.2d 638 (1977).  There, the claim was
that Blue Cross was violating its contract with its insureds by
denying benefits solely on the ground that it disagreed with the
honest judgment of the treating doctor on the need for medical
services.  Upholding the class action, we said that the common
issue of contract interpretation was "dominant and pervasive." 
Van Vactor, 50 Ill. App. 3d at 721.
     It is too early to say whether a class action is appropriate
in this case.  We merely hold the trial judge should not have let
Kostur and Blake deter him from considering whether a class
action would be a proper way to proceed.  We, therefore, vacate
the order dismissing the class action count and remand this cause
for further proceedings pursuant to the statute governing class
actions, 735 ILCS 5/2-80l, et seq. (West 1992).
CONCLUSION
     The trial court's order dismissing the individual and class 
action claims is reversed and this cause is remanded for further 
proceedings consistent with this opinion.
     REVERSED AND REMANDED.
     BUCKLEY and BRADEN, JJ., concur.